The Dow Jones Industrial Average fell slightly on Thursday following the release of weaker-than-expected jobless claims data at a time when lawmakers struggle to push through new fiscal stimulus before year-end.
The Dow 30-stock Dow traded lower 42 points, or 0.1%. The S&P 500, meanwhile, eked out a small gain, and the Nasdaq Composite advanced 0.5%. Verizon and American Express were the worst-performing Dow stocks, falling more than 1% each.
Initial weekly jobless claims jumped to 853,000 last week, topping a Dow Jones estimate of 730,000. That marks the highest number of initial claims being filed since September and the first time since October that they topped 800,000.
“Given the recent behavior of initial claims, we will likely see further increases in continuing claims going forward,” wrote Thomas Simons, money market economist at Jefferies. “Evidence has been building indicating that claims hit an inflection point in early November due to rising COVID case numbers and forced the imposition of social distancing policies that really hurt the service sector of the economy.”
Thursday’s report stoked fears about economic recovery moving forward as Congress tries to put together a new stimulus package.
Senate Majority Leader Mitch McConnell said he wants Congress to pass a coronavirus relief bill with neither legal immunity for businesses nor state and local government relief. Senate Minority Leader Chuck Schumer, D-N.Y., said McConnell’s proposal to move stimulus talks forward without state and local government aid is not in good faith.
The House of Representatives passed a government funding extension Wednesday that would keep the federal government running through Dec. 18 and buy time for further negotiations for a bigger relief bill.
Expectations of a strong economic recovery and enthusiasm over the Pfizer-BioNTech vaccine rollout in the U.K. recently pushed the major averages to record highs.
However, Commerce Street Capital CEO Dory Wiley believes caution is warranted for stock investors, noting that 90% of stocks on the NYSE trading above their 200-day moving average as an indication that valuations might be stretched.
“Timing the market is not always well-advised and paring back can miss out on some gains the next two months, but after such good returns in clearly a terrible fundamentals year, I think taking some profits and moving to cash, not bonds, makes some sense here,” Wiley said.
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